Policing Currencies

Have you noticed that in any organisation - whether it's your family or your workplace - when times are good, the environment is harmonious and cooperative. But when difficult times arrive stresses and fractures appear. Something similar is happening to the global economy today. Amidst the prolonged and difficult recovery following the crisis of 2008, the world has turned into an acrimonious place. Currency manipulation, so much in the news these days, is one manifestation of the current difficulties. It is also an issue for which the rules by which players conduct themselves need to be set in the near future. Over the years the world economy has developed extreme imbalances in the domain of external trade. Some nations - China, Germany, Japan and many East Asian nations - have followed an export-centric growth strategy to grow rapidly out of the ranks of poor nations. This was a good strategy for the early adherents, such as Japan and Germany, who followed it after their economies were devastated by World War II. But now with so many nations climbing on to the export bandwagon, it has led to problems. For quite some time now you have had a situation where there has been a glut of exports searching for markets that will absorb them. In recent years, the US economy with its rich and consumption-centric populace has served as the major consumer of these exports. But now with the US in the midst of a slowdown and its

This article was originally published on November 16, 2010.